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Author: Mike Celeste Editor: Tony Ponzo June Circulation: 6739

Stat Sheet Week Ending June 20th 2009

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow-260.0-3.0%-237.0-2.7%
S&P-25.0-2.7%+18.0+2.0%
NAS-32.0-1.8%+250.0+15.9%
In this Issue---
Options---
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Last week we pointed out that this week was expiration week for options, and this is the week where there is some fast movement in the Spy options. On the close Thursday and during Friday we saw that some of the Spy options had quite a bit of time value in them and it was likely that in 1 day or less they would not reach intrinsic value---or if they did, it would require a pretty good run to get to an even exit. Remember that writing an option is expecting that the value of that option will go down. You sell the option at X price then buy it back later to close at a price that is lower than the X price you sold it for thus creating a profit. It worked very nicely. The writing of the Spy 92 Put for 80 cents at the close on Thursday saw it at 27 cents right after the open on Friday, so that was an excellent profit of 50 cents in a matter of minutes in trading time. During Friday we saw other options doing the same thing. Time value on the last day can wear away to just about nothing as you approach the close of expiration day. Another option write we did was to sell the 140 Put on GS for .21. We entered the play after a couple hours into the trading day on Friday. We wanted to see the pattern on GS. It was trading in a fairly small range yesterday so it did not look like the stock would drop to that $140 strike price. GS kept trading within the range of about $141 to $143 and by the time the last hour of trading came, the 140 option had dwindled in value to .02. That is were we bought back to close for a profit of .19. Not a big profit but decent for only being in the trade a few hours. And remember, when you write an option, you do not lay out any money. In fact, you receive money for making the sale. You do have to be able to back the play up in case it goes against you, but we always enter these plays with a profit goal in mind and a stop target in case it does go against us. The point is, we will be out before the stock gets in a position to be put to us.

These plays we tell you about are only for educational purposes and are Not intended to imply you should make any such play. If you do plan to make these kind of trades, make sure you understand thoroughly the risks involved and talk to your financial advisor first.

Momentum Plays---
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There is not a lot to talk about in this strategy as we had another slow week. However, we did manage two trades and they were both winners. So the strategy continues its winning streak even though it was only on two trades. One exciting aspect is, we keep having members email us that from the information we give on the active page, they jump into plays we may have missed. And they almost always win. This is exciting to see, especially from members who have progressed and become more aggressive over time. See an example of this in the Feedback section below. Anyway, for those who are not yet a Momentum Strategy member check it out by clicking on this link.
Learn more

Indicators---
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There was one Indicator play on the Spy during the week and we got stopped out at a small loss, but then watched the option recover to show a profit. We conservative players accept losses as long as we can retain our win rate over 80%, as it is, and aggressive players that stick it out a bit longer often make losses into profits, or smaller profits into huge profits. We don't have the exact figures when comparing the two methods, but would guess that aggressive players come out with more net profit, even accounting for more losses. When they win, they win big, and that makes up for losses. Learn more

Feedback---
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Here's a note from a member that made trades based on our criteria even though we at SplitMaster did not make these plays ---he's making some excellent decisions.

" In at .57, out at .67, 93 put.....Thanks, Also made 4 profitable trades on yesterday's 92 put. Awesome service....Thanks again, Mike"

Great going Mike!! Thanks for letting us know and thanks for the compliment.

We also want to share an excellent question a member sent to us and our answer to him.

Question---
* in explaining the spread indicator, you say a number OVER -275 would be oversold. that means to me that a number from -274 to 0 is over -275. to me a number from -276 and higher is lower than -275. is your explanation miss-worded or are you just looking at things the opposite of me? loomis

Answer---
Hi Loomis---
You are correct, we are looking at a rising number, like -280 as being more oversold, so it is higher to us, as the Spread is getting greater--Mathematically, it is lower, but we figured that it would be more confusing to members if we said it that way. I guess some will think the opposite no matter which way we go. Thanks for being so observant. We'll try to remember to comment on it in the newsletter, for clarification.

The Economy, The Markets & Commentary---
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We wonder if there is a shift in momentum going on. This week there were a number of better economic reports that came out, but the markets had a down week, starting with the Dow dropping 187 points on Monday, with the week showing 4 down days out of the 5 for the Dow. We have pointed out that Mondays have been showing triple digit moves and it is now 6 out of the last 7 weeks that such has happened. It might be a good idea to adjust our thinking along those lines and be very careful when considering a play to the upside. Our criteria takes all that into consideration, so we are always looking for plays either up or down. As you can read from team member, Mike, there are a number of opportunities during each day's trading. It doesn't happen every day, but it doesn't take much activity to get a play going and Mike is doing very well. We are proud of his decision making.

This week was also another week of events being centered in Washington and new administration policies. There has been a great amount of debate on TV about whether these new plans, especially in the consumer area, will work. Our thought is that it is far too soon to tell. We have to wait until results are in, as this is something that hasn't happened since the Great Depression, and we don't have much to base it on, as even during the Depression it wasn't handled this way. With nothing to compare it to, it seems we just have to wait. It is not the same as seeing mortgages being passed out with 100% loans to people that don't have to prove income. It infuriates me every time I listen to these people being paid big bucks saying that they didn't see it coming. We harped about it for years, but we don’t get those big bucks, so our local representatives didn't even give us the time of day. That was so easy to see coming. This new stuff isn't. It becomes a waiting game. The voters went for the word "change" and they (we) are certainly getting change. We don't know where these billions went to, but we haven't seen much here in California. All we see is DAILY increases in our gas prices when the inventory was at 10 year highs. Our vehicle registration doubled, all utilities are going up, food is not coming down to the prices they were, but the commodity prices did fall. Our sales tax is up a full 1% more and that is a 12% increase--and some cities are having their sales tax go up 1 1/2% over last year---based on the voters in those cities allowing for the increase. It boggles our mind how anyone can vote for extra sales tax when there is a recession going on----and that vote required a 2/3 passing vote count. It more than boggles my mind, it completely scrambles it so I just throw my hands up in the air and surrender. Everywhere we turn, and we mean everywhere, our cost of living is going up. The worst part is our leaders and the media say that we don't have inflation. Today, on CNBC, the "expert" said that it really wasn't hurting the economy too much to see the gas price increases. I guess an increase of almost 100% is not considered a serious threat to consumers. Gas was down to 1.59 and now it is around 3.00/gallon --that's not a threat?
What we can say with definite certainty is that we don't lack for exciting times--it is not boring. It may be costly, but is sure isn't boring. And---there is a lot more to come. Stay tuned..............

Today's Thought---
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A conscience is what hurts when all your other parts feel so good..........


Mike

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